The Indian stock market resumed its upward momentum and logged the best week since the end of June, largely supported by positive global cues ahead of a likely interest rate cut by the US Federal Reserve. In the third week of September, investors will closely monitor key market triggers such as new listings, domestic and global macroeconomic data, US Fed interest rate decisions, foreign fund inflows, crude oil prices, and other global cues.
After a brief one-week pause, domestic equity benchmarks Nifty 50 and Sensex surged again last week and reached fresh all-time highs. The Nifty 50 surged to a record 25,433.35 before closing the week at 25,356.50, a two per cent increase from the previous week's close. Similarly, the Sensex touched an all-time high of 83,116.19 before ending the week at 82,890.94, marking a 2.10 per cent gain.
While the tone remained subdued for most of the week, a sharp rally on Thursday shifted momentum back in favour of the bulls. All sectors contributed to the rally, with FMCG, IT, and banking leading the gains. The broader indices also performed well, with the midcap index reaching a new record high.
The India VIX, or the India volatility index --which measures the market's expectation of volatility in the Nifty 50 index fell by (-17.53 per cent) and closed the week at a 12.55 level. The frontline indices rose about two per cent each for the week, their best gains since June-end.
Gains for the week were driven by a three per cent rise in consumer stocks in hopes of demand revival and volume growth due to a stable monsoon. IT companies that earn a chunk of their revenue from the US gained 2.8 per cent, ahead of a near-certain US Fed rate cut next week.
India's consumer price index (CPI)-based or retail inflation in August rose to 3.65 per cent, though vegetables and pulses witnessed a double-digit price rise. However, remained below the Reserve Bank of India (RBI)'s median target of four per cent for the second month. August retail inflation is the second lowest in the last five years.
"We expect the market to consolidate in a broader range and investors to remain cautious as major banks worldwide will announce their policy statements,'' said Siddhartha Khemka, Head - Research, Wealth Management, Motilal Oswal Financial Services Ltd.
'The hope of an interest rate cut by the US Fed has been further strengthened by recently released inflation and disappointing employment data in the US. Interest-sensitive sectors will likely be in focus this week,'' added Khemka.
Primary markets will strongly gyrate this week as several new initial public offerings (IPO) and important listings are slated across the mainboard and small and medium enterprises (SME) segments. The week will be critical from the domestic and technical point of view as investors will track global markets and macroeconomic data.
Overall, D-Street experts say the current market trend is expected to continue, and the Nifty 50 index will likely target 25,550 as the immediate goal. Sustained momentum from banking stocks will push the index to 26,000. Experts advise traders to ‘buy on dips’ and be stock-selective.
Domestically, participants will closely monitor wholesale price index (WPI)- based inflation data and foreign fund flows, especially after recent improvements. The outlook for the market will be guided by major domestic economic data such as India's bank loan growth, WPI inflation (YoY) (Aug), India's trade balance (Aug), and India's FX reserves (USD).
One of the year's most anticipated events is set to unfold this week with the US Federal Open Market Committee (FOMC) meeting, scheduled to deliver its interest rate decision on September 18. Global and domestic markets have fully priced in a rate cut, with analysts certain that this will begin an interest rate cut cycle in the US.
Market analysts said initially, market sentiment predicted that the central bank would keep interest rates unchanged. Nonetheless, several traders have now priced in a rate cut by September due to a pessimistic mood and a series of sharp stock declines.
‘’The market sentiments predict a rate cut of 25 BPS. Variables and moderate inflation may influence the next rate decision, so futures markets now indicate an 80 per cent possibility that rates will be in the 4.25–4.50 per cent range by year's end or lower. Naturally, everything will rely on how inflation develops and the economy is doing,'' said Palka Arora Chopra, Director of Master Capital Services Ltd.
In the mainboard segment, two new issues will open for subscription—Arkade Developers IPO and Northern Arc Capital IPO. Among the ongoing ones, Western Carriers IPO will close for subscription this week. In the SME segment, five news issues will open for bidding, and three ongoing SME IPos will close for bidding.
Shares of Bajaj Housing Finance, Tolins Tyres, Kross Ltd, and P N Gadgil Jewellers will be listed on the BSE and NSE stock exchanges. Additionally, shares of nine SMEs will be listed on either the BSE or NSE SME. On Monday, Bajaj Housing Finance's listing will keep the market buzzing after investors bid for 64 times the shares in the hottest IPO so far in 2024.
On the domestic front, robust foreign inflows contributed to the market's strength. Foreign institutional investors (FIIs) were net buyers, injecting ₹15,199.60 crore into the cash segment. Domestic institutional investors (DIIs) also maintained their buying streak, adding ₹2,444.19 crore to their portfolios.
Foreign portfolio investors (FPIs) invested ₹27,856 crore worth of Indian equities, and the net investment stood at ₹53,007 crore as of September 13, taking into account debt, hybrid, debt-VRR, and equities. This month, the total investment in debt markets moderated to ₹7,525 crore.
‘’Despite volatility, DIIs and FIIs flows remained positive as a strong monsoon, and an expectation of an uptick in demand during festive season drove investor sentiment,'' said Vinod Nair, Head of Research, Geojit Financial Services.
The US benchmark index, the Dow Jones Industrial Average (DJIA), and broader indices made a strong recovery in the past week, nearing record highs and signalling positive sentiment ahead of the US Fed's decision. The US markets also reached record highs, while declining crude oil prices and a weakening dollar index further supported Indian markets.
‘’With a 25 bps rate cut already priced in, a significant market reaction is unlikely. The Fed’s guidance on inflation, growth, and future rate cuts will be key in shaping broader market sentiment, particularly regarding global liquidity and risk appetite. A 50 bps cut could spark a positive reaction, especially in emerging markets like India. However, this effect may be short-lived as it could also raise concerns about the underlying strength of the US economy,'' said Ajit Mishra – SVP, Research, Religare Broking Ltd.
Santosh Meena, Head of Research, Swastika Investmart Ltd agreed. He said, ‘’The general consensus is for a 25 bps rate cut, though some market participants are speculating a more aggressive 50 bps cut. Such a move would be a significant positive trigger for global markets, particularly for emerging markets like India, as it would likely result in a weaker dollar and lower US yields, spurring foreign inflows into Indian equities.''
Also Read: RBI vs US Fed: Which central bank will cut interest rates first? Here’s a 5-point analysis
‘’From a bearish perspective, however, an aggressive rate cut could signal deeper issues within the US economy. With markets already at all-time highs in anticipation of the rate cut, there is a risk of a pullback if concerns about economic health take hold,'' added Meena.
Japan's inflation data is due Friday, followed by the Bank of Japan's (BoJ) monetary policy announcement. Any indication of further monetary tightening in Japan could raise concerns about a potential unwinding of the Yen carry trade, as interest rates in Japan and the US are moving in opposite directions. This could introduce fresh volatility to the global markets.
The outlook for the market will be guided by major global economic data such as US core retail sales (MoM) (Aug), US industrial production (MoM) (Aug), US FOMC economic projections, US FOMC press conference, US initial jobless claims, China PBoC loan prime rate (Sep). Other crucial factors influencing market sentiment include foreign fund inflows, the geopolitical landscape, and crude oil prices.
Global crude oil prices logged their first weekly gain after almost one month in the previous session after Hurricane Francine caused production halts in the US Gulf of Mexico. Oil snapped the bearish sell-off tone buoyed by weather-related hurricane warnings after benchmark Brent crude futures crashed to a 33-month low over demand and oversupply concerns earlier this week.
Brent settled lower on Friday, September 13, after US Gulf of Mexico crude production resumed following Hurricane Francine and a weekly rise in US rig count. Brent crude futures settled at $71.61 a barrel, down 36 cents or 0.5 per cent.
US West Texas Intermediate crude (WTI) settled at $68.65 a barrel, down 32 cents, or 0.5 per cent. Back home, crude oil futures settled 0.46 per cent lower at ₹5,782 per barrel on the multi-commodity exchange (MCX).
The crude oil price remains 16 per cent lower this quarter due to concerns about a dimming demand outlook. For the week, oil futures finished higher following sharp storm-related increases early in the week, breaking a streak of declines. Brent logged an increase of about 0.8 per cent since the close of last Friday's session, while WTI registered a roughly 1.4 per cent gain.
Brent crude rose above $72 a barrel, advancing for a third session. Much of crude’s recovery rally has been driven by covering of extreme bearish positioning after prices dipped below $70 earlier in the week.
Stocks of several companies will trade ex-dividend, ex-bonus, and ex-split in the coming week. Mazagon Dock Shipbuilders, Hindustan Copper Ltd, Dixon Technologies (India) Ltd, Mastek Ltd, Mrs Bectors Food Specialities Ltd, and Steel Authority of India Ltd (SAIL), among several others, will trade ex-dividend this week. Check full list here
Ajit Mishra of Religare Broking Ltd said, ‘’The prevailing market trend is expected to continue, and we are targeting 25,550 in the Nifty as the immediate goal. The recent participation from private banking majors is encouraging, and their sustained momentum could help the index reach the next milestone of 26,000.''
‘’We recommend maintaining a buy-on-dips strategy, with strong support in the 24,750-25,000 range. Along with banking and financials, we advise focusing on IT, real estate, and metals for long trades while being selective in other sectors. Given the selective participation, as the broader indices gain traction, focusing on fundamentally strong stocks in the midcap and smallcap segments is important,'' added Mishra.
On the technical charts, Nifty is currently trading at its all-time high, with 25,500 acting as an immediate resistance level. A breakout above this level could trigger a rally toward the 26,000 mark. ‘’On the downside, 25,000 has now become a crucial support level. Unless Nifty breaks below 25,000, the bullish momentum is expected to continue, and any move below this level may lead to profit booking,'' said Santosh Meena of Swaktika Investmart.
According to Meena, the key index to watch closely is Bank Nifty, at a critical resistance level of 52,000. A decisive move above this could spark a meaningful short-covering rally toward its previous all-time high of 53,357, with 52,500 being an intermediate hurdle.
‘’On the downside, 51,200 serves as immediate support, while the 100-day moving average (DMA) around 50,500 provides a more critical support level. A breach below this could shift the market sentiment,'' he said.
Palka Arora Chopra of Master Capital Services Ltd added, '"A sustained move above 52,200 could drive the index towards 52,500. On the downside, support is established at 51,600. If this level is breached, it may decline to 51,200. The prevailing positive sentiment supports a "buy on dips" strategy."
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.
